When we started Option Samurai, our goal was to make finding option ideas straightforward for independent traders. This guide will give you examples of what you can do on Option Samurai: see how our scanner, scenario, Excel integration, and backtest tools can generate and validate option trade ideas, offering predefined scans, strategy comparisons, and data analysis for optimal trading opportunities.
Key takeaways
- In this article, we’ll show you how to get option ideas using Option Samurai’s scanner, scenario, Excel, and backtest features.
- The scanner feature scans the entire market using live data to help you find optimal trade opportunities. We also have predefined scans, the ability to create custom scans and alerts to improve your workflow.
- The scenario feature facilitates strategy comparison, while Excel integration aids in thorough analysis.
- You can also run one of our free backtest files on an underlying’s past data to validate your option ideas.
Using Our Option Scanner
The first way to spot great option ideas is through our options scanner. This tool is designed to identify lucrative option trade ideas by analyzing various market conditions and trading scenarios. Consider that, on our website, we have dozens of different predefined scans for you, and you can even create your own scan if you wish. Let’s look at two specific examples that will certainly help you understand how the scanner works.
Evaluating Weekly Calls that Will Explode in Values with 1 ATR Move
Our “Weekly Calls that Will Explode in Values with 1 ATR Move” scan (you’ll find a link at the bottom of the text) is perfect for traders looking for option ideas with high-profit potential. This predefined scan leverages our scenario engine to project the value of an option if a specific event, such as a +1 Average True Range (ATR) movement in the underlying asset’s price, occurs before the option expires.
Here is what you would normally see:
- On the left side of the screen, you’ll find predefined parameters that you can adjust and save as your own custom scan.
- On the right, you’ll see the scan results, with different option ideas sorted by potential profit at expiration.
Take, for example, SNAP. With SNAP trading at $8.62, you could purchase a $9 call expiring this week. A +1 ATR move could push the price to $9.53, offering a nice 430% profit, as you can see in our options screener:
Look at SNAP’s price chart below, and you’ll see this target isn’t unrealistic (the price you need to reach to earn a profit is not that far):
The question is whether you believe this move is possible before expiration. If so, you’ve found your trade. Otherwise, you can adjust the expiration dates in the scanner to find better option ideas.
The Wheel Strategy Scan
Another powerful tool is our “Wheel Candidate” predefined scan (see link at the bottom of the article), ideal for those interested in the Wheel strategy. This scan identifies potential candidates by evaluating naked puts, focusing on high-probability options with attractive returns.
- It looks for puts with an annualized return greater than 15% on solid companies with dividends.
- The typical covered call return should exceed 12% annualized.
Here is a typical example of what you will see on your screen in terms of wheel-related option ideas:
Now, consider BAC trading at $38.76:
By selling a $37 put expiring in two weeks, you can either collect the premium if BAC closes above $37 or get assigned the stocks to initiate the Wheel strategy. Our article on this strategy, linked at the end of the text, offers further insights.
Looking at BAC’s price chart, there’s noticeable support around the breakeven price of $36.63 (the strike price minus the option premium):
This support suggests a strong chance of closing the put for a profit. If not, executing the Wheel strategy could still yield significant returns. Notice that this is just an example, you could replicate this reasoning to any option ideas in the scanner’s output.
The Stock Scenario
In the first scanner example above, we briefly mentioned the “Scenario” engine. Now, let us talk a little bit more about what you can do with it. This feature supports evaluating different P&L profiles, allowing traders to tailor their strategies based on their risk tolerance and potential returns.
Imagine you expect Apple Inc. (AAPL) to trade above $230 by the month’s end. Currently, it’s around $220, and a mild bull market could make your prediction come true. Here’s how you can use the “Scenario” tab in our screener to find different option ideas:
- Ticker: AAPL
- On date: Choose the expiration date that matches your prediction
- Price target: Select “Above target”
- Price level: Enter $230 or choose a percentage variation from the current price (you can also use analyst target price, 52w high or other variables.)
This is what your input data would look like:
When you click “Run,” the site presents several option strategies compared to a simple long position on AAPL, as you see below:
For example, a long call might offer a significantly higher percentage profit than just holding the stock. Other strategies, like a naked put, bull call spread, or bull put spread, are also worth evaluating.
This tool lets you experiment with the balance between the probability of profit and potential return. Typically, a higher probability of profit comes with a lower maximum profit and vice versa. Once you find a strategy that suits you, simply click “Trade” to add it to your trade log and monitor it. Starting with paper trading can be a good way to get comfortable using this feature and exploring various option ideas without financial risk.
Excel Integration
Option Samurai also offers a powerful Excel integration to support traders in finding and evaluating option ideas. Our Excel templates, coupled with API integration, provide seamless access to real-time data, enhancing your ability to assess trade ideas efficiently.
Excel Plugin Features
The Option Samurai Excel plugin simplifies the process of integrating market data into your spreadsheets. By importing data directly through formulas, you can keep your models current with just a few updates to cells or dates.
This is particularly useful for analyzing stock data like ratios, balance sheets, and prices, as well as options data such as implied volatility, Greeks, and IV percentiles. After installing the plugin, enter a formula with your desired ticker and data fields.
Your sheet will automatically refresh with the latest data, and you can reference cells to update models for different tickers or data points. To assist you, a help pane in Excel guides you through creating and using formulas correctly.
Reverse DCF Excel and Google Sheets Template
A good example of our Excel integration is the Reverse DCF template, which helps you determine a stock’s implied growth rate based on its market price. This insight reveals market perceptions of a stock’s value, aiding in decisions about whether it’s underpriced, overpriced, or fairly valued.
Consider Dropbox (DBX) trading at $23.10. Using our template, you can input assumptions to uncover that the market is pricing in a -9% growth rate for its free cash flow. The data you will input will look like this:
Here is what the template would tell you:
What could you conclude with the info above? Let us give you a few hints:
- Analysts project a 7.8% annual EPS growth over the next five years.
- This discrepancy suggests that DBX might be undervalued, because it is fair to assume that, over the long run, the EPS and free cashflow growth will have the same direction.
- As yet another hint, consider that analysts are targeting a price of $27.74.
As you can see from above, this model allows for scenario analysis, helping you make informed long-term investment decisions.
Adding Excel integration into your trading strategy offers a customized approach to finding new option trade ideas. As you saw with our Reverse DCF example, you were able to replicate the same type of analysis a professional investor would perform in less than 1 minute. Note that we have a version of this template that adds options ideas to the reasoning. We’ll add a link to this at the end of the text.
Extra: Evaluate a Strategy with our Free Backtest Files
The last thing we want to tell you is about the benefits of using our free backtesting files to evaluate option ideas. These files allow you to assess the viability of different strategies by analyzing historical data. This approach is invaluable in determining how strategies might perform under various market conditions.
Using the ADX Indicator for Iron Condor Strategy
A nice example is using the ADX indicator to validate an iron condor strategy. When the ADX is below 20, it signals a sideways trend, making it an ideal time to deploy an iron condor. This strategy benefits from a stock entering a horizontal price movement phase. You can target stocks where the ADX has recently dipped below 20, marking a potential sideways phase, and then set up an iron condor to capitalize on this trend.
These backtesting files, along with detailed instructions, are available in the Research section of our blog. We’ll add the relevant link you need to have on this topic at the bottom of the text.
